The Farmers’ Almanac is predicting a winter that is bitter cold, snowy and wet. That could make for expensive insurance claims if businesses aren’t prepared.
According the Insurance Information Institute, winter storm claims accounted for 6.4 percent of all insured losses between 1994 and 2013 in the United States, ranking third behind tropical storms (41 percent) and tornados (36 percent). That amounts to $1.2 billion a year on average. But in 2014, winter storms jumped to second due to a quiet hurricane season.
In the first quarter of 2015, insurance claims for winter weather-related damage reached $2.3 billion, down slightly from the same time in 2014. While that’s a national number, the majority of those claims originated in the Northeast, which got hammered by snowstorm after snowstorm. For example, Travelers, one of the leading writers of U.S. commercial property casualty insurance serving the New England market, reported winter-related catastrophic claims of $162 million in the first quarter of 2015 compared to $149 million for the same quarter in 2014, an 8.7 percent increase.
State-specific numbers on claims were not readily available, but insurance agents across NH readily admit it was a rough winter from their perspective. At Cross Insurance in Manchester, Lisa DeGrace, director of claims and risk management, says it was the busiest winter for claims in New England that the insurance industry has seen in 40 years. “Last year, there were so many ice dams, it was practically a state of emergency,” says Joe Czarnecki, the commercial lines manager for Davis and Towle in Concord, a trend identified by other insurance agents as well. While ice dams on roofs were the most common problem, frozen and burst pipes were the most expensive. Czarnecki says rates have mostly remained flat for this year as insurers try to keep rates stable.
At least to a point, says Jeff Foy, owner of Foy Insurance. Foy says rates “tend to go up a little bit each year anyway,” adding the effects of last winter will not be fully realized until they get renewal rates that reflect the catastrophic claims from last winter. He says that data may not be available until 2016. Still, he says businesses that own a lot of property, such as apartment complexes, should expect high single digit increases, as could businesses that submitted a major claim last year.
Apart from claims, NH insurance companies felt the effect of the storm in much the same way as other businesses. For the first time in 30 years, Foy says he closed all 12 of his offices in NH, Maine and Massachusetts after a late January storm.
While the weather is something no one can control, agents say there’s plenty businesses can do to protect themselves from winter damage claims. “Even if it’s covered, you don’t want an insurance claim if you can help it,” says Rachel Giunta of Melcher and Prescott in Laconia. With winter just over the horizon, here is what these agents recommend:
Protecting Your Property
• Check the trees around your building and parking area. Make sure they are healthy and that any dead branches have been trimmed. Some insurers want a minimum of 36 inches of clearance around any building, Giunta says.
• Conduct an energy audit. Use thermal imaging to find out where you are losing heat. Areas with poor insulation and ventilation can allow ice dams to form, allowing water to seep into a building. Ice dams contributed to many of last winter’s damage claims for that reason, Czarnecki says.
• Make arrangements to monitor a building that’s not regularly occupied. “It’s not always snow,” that causes problems, DeGrace says. “It’s severe cold.” One possible fix: invest in a system that will alert you if the heat drops below a certain temperature. Monitoring vacant buildings is also extremely important, DeGrace says.
• Line up contractors. Know who to call in an emergency and build good relationships with people you can trust, says Foy. Then when you use their services, pay promptly. This will make them more likely to respond when you call the next time—like when you have four feet of snow on your roof and need a crew to shovel it off. “Contractors say to me all the time: I want to take jobs where I get paid,” he says.
• Clear the roof. Heavy snowloads led to roof collapses last winter, says Bret Cote, vice president of Clark Insurance in Manchester. Make sure to have a contractor that is responsible for clearing snow from the roof as well. Cote warns old mill buildings have rooftop drains and building owners need to check to ensure those drains are not frozen over or blocked by debris. Otherwise ice dams can form and cause water damage. Also, large icicles can form on rooftops. Unless cleared they could fall and damage property, or injure or kill a pedestrian, Cote says.
• Install a generator. This is especially important for a business where the loss of power will likely put products, such as frozen food or research experiments, at risk. While it can be expensive to get an automatic generator installed, the expense may be justified by the potential savings. Portable generators can be a useful back up when needed. Some insurers, according to Foy, are starting to offer credits to businesses with automatic built-in generators.
Having an automatic generator may allow you to remain open when others are closed. In a widespread power outage, you won’t only save on claims, you’re likely to gain new customers, Foy notes.
If you use a portable generator, install a bypass system. Without it, the generated power could feed back into the main electrical system and electrocute line workers trying to restore power, Foy says.
Hire a licensed electrician to install the bypass panel and a designated outlet that connects to it so it can be switched.
• Avoid potentially dangerous “fixes.” Old New England buildings often have cold corners or heat-leaking dormers that cause people to use small space heaters, heat wires on a roof or heat tape on an exposed section of piping. While some of these options may make sense if used carefully, insurance experts recommend seeking out the root of the problem and investing in fixing it. That may mean a one-time expense for a new heating system or better insulation. That investment could be less costly in the long run when balanced against safety, the potential for loss or rising insurance rates, Czarnecki says.
Protecting Against Liability
• Check your walkways and parking lot after a rainy day. Where is the water pooling? You can guess what will happen to those spots in winter after a freeze. Fill in those dips now to protect against a slip and fall claim later, Foy says.
• Mitigate Chances of Slipping and Falling. One of the most frequent and costly claims is from people slipping and falling, says Cote of Clark Insurance. He says it is vital to keep sidewalks, loading docks and parking lots shoveled, plowed, salted and sanded. Employees who are injured not only mean paying out claims but also losing productivity, he says. Cote also warns that 10 percent of business claims are made by customers or passers-by who slip and fall on the premises and the average cost of such claims is $20,000.
• Put it in writing. Draw up sensible contracts with those you hire to plow, sand or shovel. Make sure your crews are insured. “Contracts are a mechanism for transferring responsibility and liability,” Czarnecki notes. The goal is clarity so if there’s a problem, everyone knows what to expect and whom to call. One way to do that is to get your business listed as an “additional insured” on the contractor’s certificate of insurance. It’s not automatic, Giunta says. “You have to ask for that.” But it will create an additional layer of protection allowing you to go to your contractor’s insurer if a claim against your business is made.
• Stock up ahead of time on the things you need. That can include sand, salt, roof rakes and shovels. You don’t want to end up in a long line at the hardware store or find they have run out.
• Create a plan for your employees in bad weather. Decide ahead of time when you will close and how you will handle that. Make sure you have a plan for communicating with your employees and potentially your customers and vendors if you decide to close. If you allow people to work from home, ensure that private customer or employee data is not put at risk as laptops move in and out of the office. When employees, like sales people, need to be out and about in the winter, DeGrace suggests filling a small water bottle with sand and leaving it in the car. That way, an employee who parks in an area where it’s slippery can easily sprinkle sand where he or she has to walk.
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